Issue
Is the entity, a crematorium, making a GST-free supply under item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it contracts with an Australian resident to send cremated remains overseas?
Decision
No, the entity is not making a GST-free supply under item 3 of subsection 38-190(1) of the GST Act when it contracts with an Australian resident to send cremated remains overseas. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a crematorium. The entity provides a service to package and send cremated remains overseas. This service is separate to the cremation and associated funeral services.
The entity enters into a contract with the authorised person (an Australian resident) to package and send cremated remains overseas. This authorised person is the person who has a right to receive the cremated remains, and as such, has the exclusive authority to give directions to the entity in relation to these remains. The authorised person is physically in Australia at the time of the supply.
The entity requires the signature of this authorised person before it gives effect to any direction it receives in relation to the cremated remains.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Under section 38-185 of the GST Act the export of goods, in certain circumstances, is GST-free. Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside of Australia, may also be GST-free. In order to determine whether a supply is GST-free under either of these sections, the characteristics of the supply must be examined.
The term 'goods' is defined in section 195-1 of the GST Act to mean 'any form of tangible personal property'. Whilst no reference is made in the GST Act to whether cremated remains are GST-free, common law provides that the body of a deceased is not considered the personal property of another. Rather, a duty of care is conferred upon a person, by virtue of their relationship with the deceased, to give the deceased a decent burial. This judgement can be extended to include the cremated remains of a deceased person, thus the remains are not considered goods for the purposes of the GST Act.
As cremated remains are not goods, the supplies provided by the entity cannot be characterised as the export of goods. Thus, under the GST Act, the supplies made by the entity may be characterised as supplies of things, other than goods or real property.
Section 38-190 of the GST Act provides that in certain circumstances, the supply of things other than goods or real property for consumption outside of Australia is GST-free.
As the entity is making supplies to Australian residents, item 3 in the table in subsection 38-190(1) of the GST Act (Item 3) is of particular relevance. Item 3 provides that a supply is GST-free where: • it is made to a recipient who is not in Australia when the thing supplied is done; and • it is effectively used or enjoyed outside of Australia; and • it is not a supply of work physically performed on goods situated in Australia when the thing supplied is done; and • it is not a supply directly connected with real property situated in Australia.
Subsection 38-190(4) of the GST Act provides that a supply is taken, for the purpose of Item 3, to be a supply that is made to a recipient who is not in Australia if: • it is a supply under an agreement entered into, whether directly or indirectly, with an Australian resident; and • the supply is provided, or the agreement requires it to be provided, to another entity outside Australia.
Therefore, to be able to satisfy the requirements of Item 3, the supply must be made to a recipient who is not in Australia at the time of the supply, or the agreement must require that the supply is provided to another entity outside Australia.
In this case, the supply of the entity's services to package and send the cremated remains overseas is made to the authorised person who is physically in Australia at the time of supply. Furthermore, it is considered that the supply is not provided to another entity outside of Australia even though the terms of the agreement require that the cremated remains are sent overseas. Rather, the supplies are explicitly provided to the Australian resident.
As the recipient of the supply is in Australia and the provisions of subsection 38-190(4) of the GST Act do not apply, the supply is not GST-free under Item 3 when made to an Australian resident.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it contracts with an Australian resident to send cremated remains overseas.